A Bloomberg report said the largest luxury-home builder in the US had stalled the company's boost to upgrade its investment-grade rating. Toll Brothers Inc decided to offer a USD1.7 billion debt to refinance its bonds and planned acquisition of homebuilder Shapell Industries Inc.
Chief Financial Officer Martin Connor said it would obtain a maximum of USD800 million on a revolving credit line. Connor also said the company would be borrowing the remaining amount in public-debt and bank-loan markets.
Toll earlier said in a statement that it would be acquiring the California-based Shapell for USD1.6 billion. The acquisition would be funded via a USD200 million share offering, Toll said. Toll also revealed that it would be borrowing USD1.4 billion to finance the acquisition. The home builder added that it could also sell 10-year debt amounting to USD300 million to refinance its 4.95% notes valued at USD268 million. The securities would be due on March next year.
In a telephone interview scheduled on November 8, Connor added, "We're going to get temporarily leveraged for about a year, then we'll start coming back down. We're taking on a lot of debt to do it. It makes the likelihood of us getting investment grade delayed."
Toll was rated Ba1 and BB+ by Moody's Investors Service and Standard & Poor's respectively. The ratings agencies affirmed the ratings the provided to Tolls on November 7. The ratings indicated that Toll was just one step below investment grade, Barclays Plc analysts Eric Gross and Alex Gennis had written on a note on November 8 that Toll could get its grade boosted at a higher grade in 12 to 18 months.
Data compiled by Bloomberg indicated that Toll's USD1.04 billion unsecured revolving credit line could pay 150 basis point more than LIBOR or the London interbank offered rate. Connor added that Toll would be borrowing a second 364-day revolving credit line worth USD500 million to augment the first line of credit. This way, Connor said, would allow his company to remain liquid.
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